Proposal to save taxpayers $6.2M

[Open letter to] CUSD 200 Board members,

Congratulations, Wheaton-Warrenville District 200 voted to build a new Jefferson preschool without raising taxes.

D200 said it could fund the project from operating revenue.  So tell me, why is the district still planning to use 20-year “lease certificates,” which will cost the taxpayers $6.2M more than necessary?   These tax dollars should be paying for educating students and maintaining our buildings rather than funneling them to consultants and out of state lenders.

Estimated Cost of building a new Jefferson

Based on estimates in Legat Architects 7/10/2018 presentation & the construction bids from August 2018:

  • $15M Construction Cost
  • $1.3M Architectural & Engineering (at least $600,000 already paid)
  • $1.3M Post Construction
  • $17.6M Total cost ($17M remaining)

In 2018 the district had planned to use a 20-year “lease” to avoid the referendum.  We assume using the same debt structure would result in the same interest payments of $6.2M. (See attached debt schedule from an Oct 2018 FOIA : 20yr Lease Certs CM Est Debt Service Schedule.shaw.10.19.2018.2).  The interest may actually be higher as interest rates are trending up.

Details – “Lease Certificates” & their risk:

At the 1/17/2018 board meeting, Bob Lewis of PMA presented the lease Certificate agreement including potential risk to using a “lease” for funding.  He starts speaking at 1:57:00  youtu.be/wC9gRv3tTVM?t=1h56m35s.

 From page 6 of his presentation:

Potential risks of lease financing

  • The payments are paid from operating funds which could squeeze other operating expenditures over time.
  • A change in the law prevents the District from taking ownership of the building once construction is completed and the lease is paid off
  • If a private entity is utilized as the lessor, there is a chance the property will be subject to property taxes
  • The lessor enters into bankruptcy

All of these risks still exist.

 

Furthermore, the “lease” you originally signed gave the building title to a third party for the duration of the “lease” despite the district having 100% of the risk, responsibility and authority for the building.  Why would you do this again when there is nothing to be gained by it?  As a reminder, I have attached section V or the law suit. Documented there, but not challenged in a court, a “lease” requires that a true lease exist; the “lease” as signed in March 2018 was a disguised bond sale. complaint sec V not true lease

Proposal to Fund from operating budget

The following fund-out-of-operating-budget-&-cash-reserves method is being proposed to avoid the $6.2M in interest payments.  You can plan to use Tax Anticipation Warrants* (TAW) to cover the cash flow shortage in April and May which is expected before the first installment of property taxes arrive in June.  (See attached historical cash flow for previous use of TAWs : Historical D200 fund balance).

Currently D200 has excess funds in cash reserves that can be utilized for Jefferson.  By cutting other spending, or using TAWs, D200 can find a few million more for a total of $17M to complete Jefferson funding in FY2019 & FY2020.  If you break ground in April or May 2019,… and plan to remove the existing building, pave the parking lot and landscape in the summer of 2020 after school lets out the building could open in August 2020 and be paid for with operating fund + reserves in two fiscal years with NO long term debt – a saving of $6.2M over the current “lease” proposal.

5-year forecast

Note: The 2018, 5-year forecast (attached : forecast5 10.19.1) includes the plan to pay for Jefferson via lease certificates.  Might I suggest that it be updated to include any known changes to revenue (e.g. new Amazon facility) or expenses, and then what-if Jefferson is paid for out of the operating budget and reserves as proposed above.

Schedule

The original timeline had 8/16/2018 Start Construction, and 8/21/2019 Occupancy.  So, my suggestion of waiting until spring of 2019 for ground-breaking and finishing by August 2020, in time for the next school year should be quite doable.  Rushing to complete it any sooner (January of 2020 was discussed at the November Board meeting) will add cost due to working in winter weather, logistical issues of moving equipment and classroom supplies over Christmas break, and the chaos of students being dropped-off and picked-up at a new building without the new parking lot and access roads being complete.

Attachments:

[linked here & inline when referenced]

__________

Tax Anticipation Warrant (TAW) – a short-term debt security issued by a municipal government to finance current operations or an immediate project that will be repaid with future taxes.  District 200 used TAWs in 2009, 2010 and 2011.

Jan Shaw

School Bond Debt Drives Property Taxes

School districts need to keep borrowing so that they can spend today and tax tomorrow.  They think as long as they are not raising taxes much, we won’t notice.  But, we are paying attention.  When we approved the last referendums (Hubble, high schools…) those were to be paid off in 20 years – like a mortgage.  Instead, the school board has refinanced bonds to lower current payments and push the all-paid date out.  Then they borrow more – new, non-referendum bonds.  It is now more like a home equity line of credit that will never be paid off, so taxes will never go down.  Currently about 9% of our property tax bill pays for past school district borrowing.  If we STOP future bond issues our taxes will go down!

Vote “NO.”  Pay attention, don’t let them use your home equity to finance their spending.

From p7 of a PMA presentation to the District 200 board on May 9, 2018:

may 2018 pg 5 benefits of restructuring

Read that second line carefully.  They are restructuring bonds to create head-room for more borrowing that they hope no one will notice.  The 2018 restructuring has now been done.  The 2019 must be done, because it is the part that extends the debt.  Currently the repayment schedule peaks even higher!

The “CUSD 200, Financing Options for Refinancing/Restructuring” presentation was given on May 9, 2018, by Robert E. Lewis III, of PMA Securities, Inc.  See it: 2018_5_9 bond refinancing PMA

 

Finance Meeting

There is a finance meeting tomorrow, Nov. 6 at 3:30 pm at the school service center.  It is open to the public.

finance meeting 11_6_2018_notice

 

QA Jefferson with links for details

 

I will be voting “NO” despite the fact that everyone (me included) would like to say “yes” to a new Jefferson Early Childhood Center…

 

Bottom line:

District 200 cannot afford a new building without issuing new debt that will let them spend today while taxing tomorrow. The latest 5-year forecast, which does includes a new building, shows a $26 million deficit.  In recent years, the end-of-May financial report shows that prior to the first installment of yearly property taxes, the District’s money in the bank dips to around $15 million.  So while the referendum wording says “without levying a separate, special property tax,” they will need to find money somewhere.

Flyers

If you want to print something to share with neighbors, see:  https://dupagewatchdog.org/2018/10/vote-no-flyers-to-print/

Q/A:

1. Is a new Jefferson a “need” or a “want”?

  • The voters will decide.
  • posted 10/28/2018:  d200-pre-k-enrollment-cost/  (note: the grant programs for Head Start and the all-day Preschool Expansion grant (PEG) are not mandated.) 

2. How much will it cost vs. renewal of the existing building?

3. Can we afford it without raising taxes?

4. Is it our top priority given that 18 out of the other 19 building have a total “need” of $87 million in capital renewal?

5. If all CUSD 200 bonds were paid off how much would our taxes go down?

6. What has the school board been prioritizing, by already approving the spending?

7. How much, and who is paying for all the “vote yes” PR?

8. Why do we suddenly have a referendum? Has the district been telling the whole story?

 

originally posted 10/25/2018, updated 10/28/2018, & 10/31/2018

High Property Taxes due to District 200 Bond Debt

Take a look at property tax bills over the years.  If you live in Wheaton-Warrenville CUSD 200 you’ll notice the largest and fastest growing portion is for the school District

eav tax rate history D200

EAV ( Equalized Assessed Value) is the product of the assessed value of the property (both land and improvements) and the State Equalization Factor. The EAV value in the above chart is the total for all taxable property in District 200.

 

Tax Levy is the amount of money the school district is requesting for a tax year.  The school board sets a levy to be what they had in the previous year’s base levy plus inflation, plus value for new construction or TIF areas becoming taxable, plus the amount needed to make scheduled bond (principle + interest) payments, round up to ensure taxing to max allowed by law.  The school board set a Levy once per year.

 

The Extension is the total amount of property taxes the county bills to property taxpayers.  It is the lesser of the requested levy and the maximum tax allowed by law.  The base portion is limited to last year’s + inflation + growth.  The portion for bonds is whatever has been contracted for debt services.

 

The tax rate is set by dividing the Extension by the total EAV.

 

The statistics in the chart come from the following documents:

Illinois Department of Revenue (IDOR), Property Tax Statistics by Year.

 

DuPage County Clerk, Property Tax Rate and Extension Reports.

Property value down – Taxes UP / Tax Rate down – Taxes UP

Your property tax is your property’s EAV times the tax rate.  Even when EAV fell (2010 to 2014), because the total EAV fell as well, and the tax extension went up, odds are your taxes went up.  Recently, EAV went up, the tax Extension went up, and the tax rate fell.  For most, taxes went up.  In fact you might notice that taxes always go up.  The only way it will ever go down is if the district stops issuing new bonds and pays off existing bonds.

 

Note: from District 200’s third flyer, they expect you to care about “Tax Rate” rather than your “Tax Bill.”

flyer3 p4 w comment

For project cost, see: https://dupagewatchdog.org/2018/10/how-much-will-a-new-jefferson-really-cost/

From “M Wheaton” FaceBook page,  the attitude of those promoting the referendum:

posted 10/31/2018

you should move 10 31 mywheatonFBPosted 8/21/2018

mindy Jefferson yes attitude